Development and structure of flexible forms of employment

Since 2002, the German labour market has been subject to various reforms designed to stimulate job creation These reforms have provoked public debate on the growth of flexible employment and the possible negative consequences. A newly published study indicates that flexible forms of employment often serve as a stepping stone, helping unemployed persons to enter the labour market and workers in flexible employment to access regular jobs.

In recent years, the German labour market has undergone profound reforms. For example, rules on social welfare benefits and temporary agency work have been reorganised (DE0409204N, DE0608049I, DE0212203N). While these reforms were undertaken to stimulate job creation, among other things, they also triggered a public debate on the possible negative consequences of flexible forms of employment.

A recently published study (in German, 130Kb PDF) by the Cologne Institute for Economic Research (Institut der deutschen Wirtschaft, IW) shows that the proportion of flexible employment in relation to total employment has risen in recent years. However, the study also highlights that flexible forms of employment often serve as a stepping stone for those entering the labour market or permanent full-time employment – for instance, unemployed persons, those previously economically inactive or low-skilled workers.

Survey data and study results

The IW study analyses data from the German Socio-Economic Panel (Sozio-oekonomische Panel, SOEP), a longitudinal panel study. Most recently, about 20,000 persons in 11,000 households were surveyed. The study provides information on living and working conditions in Germany – including the development of employment forms, willingness to take risks, values and individual careers.

Employment characteristics

Using this data, the IW analysis compared different categories of employment defined by the following criteria:

  • form of work – such as employed, self-employed or civil servant status;
  • working hours – that is, full-time, part-time or marginal part-time hours;
  • form of contract – that is, permanent or fixed-term work.

Vocational trainees and civil service trainees were also included. The study notes that the descriptive term ‘regular employment’ is closest to its category of permanent full-time employment – which includes civil servants holding a permanent contract and working full time, but excludes temporary agency workers.

As shown in the table below, the proportion of the working age population in permanent full-time employment declined from 40.1% in 1988 to 37.7% 20 years later. In contrast, the share of fixed-term full-time employment rose from 2.1% in 1988 to 4.1% in 2008, while the proportion of permanent part-time employment increased from 6.6% to 10.1% and the share of marginal part-time employment rose from 1.6% to 5.4% in the same period.

German workforce, by form of employment, 1988–2008 (%)
  1988* 1993 1998 2003 2008
Permanent full-time employment 40.1 41.0 38.3 36.7 37.7
Fixed-term full-time employment 2.1 3.3 2.9 2.9 4.1
Permanent part-time employment 6.6 7.0 7.9 9.8 10.1
Marginal part-time employment 1.6 1.5 1.8 3.9 5.4
Full-time self-employment 4.8 4.9 5.1 5.3 5.1
Other employment forms 11.7 10.4 9.9 9.3 10.4
Unemployed 4.7 6.9 8.0 8.5 7.2
Economically inactive 28.5 25.1 26.0 23.5 20.0

Notes: Figures relate to percentage of the population aged 15 to 64 years.

*1988: Only western Germany.

Source: SOEP, IW

Rise in flexible employment

The IW study shows that the rise in flexible employment can only be partly attributed to a general decline in permanent full-time employment. The growing significance of flexible employment is mainly ascribed to a decline in economic inactivity, which dropped from 25.1% in 1993 to 20% in 2008. Moreover, unemployment decreased from 8.5% in 2003 to 7.2% in 2008. In fact, the share of permanent full-time employment has actually risen slightly in more recent years, from 36.7% in 2003 to 37.7% in 2008.

When looking at developments in relation to employees’ contracts, it should be noted that 1.65 million employees in permanent full-time employment in 2003 were in flexible employment five years later. On the other hand, 1.8 million employees in flexible employment managed to secure permanent full-time positions in the same period.

Moreover, 1.1 million persons who were unemployed in 2003 held a flexible employment contract in 2008. On the other hand, only 600,000 employees in flexible employment in 2003 were unemployed in 2008. Given these positive balances, the analysis concludes that flexible employment often serves as a stepping stone for those seeking work and creates additional employment.

Effects on poverty risk

Nonetheless, when comparing the poverty risks of different forms of employment, the study also shows that this risk is higher for employees in flexible forms of employment. For example, the proportion of employees engaged in permanent part-time work and marginal part-time work who were at risk of poverty amounted to 10.2% and 23.6% respectively in 2008. In comparison, the poverty risk for employees in permanent full-time employment has remained stable over time, at 3.4% in 1993 and 3.5% in 2008. However, the greatest poverty risk was faced by unemployed persons, at 61.1% in 2008. Securing a position in marginal part-time or permanent part-time employment reduces the poverty risk of unemployed persons. The poverty risk is defined as the proportion of persons with incomes below 60% of the total average equivalent income.

Commentary

The IW study concludes that although flexible forms of employment carry a higher risk of poverty, they remain an important employment opportunity, not only for unemployed persons, who face the greatest poverty risk of all groups, but also for low-productivity workers. Both groups often find it difficult to enter the labour market, due largely to their lack of proper qualifications.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment